How Will the New U.K. Government Change the Airline Industry?

Skift Take

After a snap U.K. election, the results are in. A landslide for the Labour party means aviation pledges should soon turn into practice. The industry will be watching.

It’s the morning after a resounding Labour victory in the United Kingdom. As Sir Keir Starmer’s center-left party prepares to ascend to 10 Downing Street, attention turns from campaigning to policy-making.

So what does this seismic change mean for the aviation industry in the U.K. and beyond? Skift takes a closer look at the party’s manifesto and its comments over recent years, to see what could be in store for airlines and other stakeholders. 

Aviation is mentioned in Labour’s manifesto – a written declaration of a party’s policy and aims. Within the 136-page document, it notes two specific areas focused on the industry’s long-term future. The first is the promotion of sustainable aviation fuels (SAF) and the second encourages airspace modernization.

More Eco Fuels for Airlines

SAF has been a hot topic in the industry for years, and its prominence is only growing. Late last year, Mike Kane, then the opposition Aviation Minister, highlighted that meeting the 10% SAF target is a legal requirement of the Paris Agreement on climate change, and one his party will be meeting.

Notably, in April 2024, the outgoing Conservative government introduced a new mandate, including a requirement for 2% SAF usage by 2025, increasing annually to 10% by 2030. 

It is currently unclear if the new Labour administration plans to add further incentives or deterrents to the existing mandate for fuel suppliers. The existing path remains largely compliant with the Paris deal. If executed as planned, it could lead to a tangible reduction in emissions, albeit with buyout clauses in case targets are not met.

However, with a government-backed revenue certainty mechanism still in the works for 2026, Labour has a chance to bring big investment to the sector, an issue the Conservatives deferred before the general election.

Airspace Modernization

Another long-standing priority for U.K. aviation has been modernizing air routes. While the aircraft we fly today are often state-of-the-art, many of the air corridors they follow were first set up in the 1950s. 

Put simply, the nation’s airspace – along with many of its regional counterparts – is in dire need of change. NATS, the organization that provides air traffic control services at the country’s biggest airports and manages all U.K. upper airspace, estimates by 2030, one in every three flights from the U.K. will be delayed by over 30 minutes. It also predicts that the average length of delay would rise from nine minutes in 2015 to 26 minutes by the end of the decade. 

Labour’s modernization plan brings in stakeholders from across the industry, including NATS and airlines. Benefits should extend to non-flyers too, with a reduction in noise pollution due to fewer low-altitude routes, and lower emissions thanks to more efficient air routes. 

While the core principles are welcomed by many, more investment will be needed to achieve bold net zero target goals and maintain the country’s global competitiveness. 

Heathrow’s Third Runway

The debate over a proposed third runway at London’s Heathrow Airport has been bubbling away for decades, spanning both Labour and Conservative governments.

While the pandemic stalled the issue thanks to shrinking passenger numbers and tightened finances, Heathrow has been hitting record traffic levels once again. More passengers will likely bring a push for decisive action on a plan for a third runway to keep Heathrow as a global aviation mega-hub. 

Labour’s manifesto was quiet on this issue, however Shadow Chancellor Rachel Reeves did comment on the topic earlier in the week. Writing in The London Evening Standard she said: “I want Heathrow to be that European hub for travel. We would need to look at all the evidence at that, but I have nothing against expanding airport capacity…I back investing in infrastructure.”

While Reeves’ comments might seem like a shot in the arm for the project, it was Sadiq Khan, the Labour Mayor of London, who led an earlier charge against Heathrow’s expansion. He cited noise and air pollution, as well as a strain on existing transport networks.

Speaking to the U.K. Airport Operators Association in 2023, per The Independent, Shadow Aviation Minister Mike Kane appeared to pour cold water on the idea: “We probably have enough runway capacity as it is. What we have to do is connect it up.”

Air Passenger Duty and Other Taxes

One issue where Kane has hinted at change is the current form of the Air Passenger Duty (APD). This is the tax payable on most flights taking off from a U.K. airport. It ranges from a few pounds per passenger for a short economy flight to more than £200 ($255) for a long-haul business class departure. The levy is even higher for private jets. 

Speaking to British travel trade publication TTG about APD, Kane said that Labour doesn’t plan on pricing passengers out of flying, noting that, “That’s not quite how it works, and there’s a social justice issue… who are we to deny them [those on lower incomes] their right to a holiday?”

Kane added that APD hasn’t reduced demand at Heathrow but instead affected regional airports, adding, “I am sure on the horizon we will look at how we allow our regional airports to compete in such an environment where they are disadvantaged at the moment.”

While airlines shouldn’t expect sudden APD deductions for long-haul business class services, domestic travelers could see some relief in this area.

Following the APD increase earlier this year, all eyes will be on Labour to see if the tax remains another revenue raiser for the new government or if they’ll risk upsetting environmentalists to make parts of the aviation industry more competitive.

Airlines Sector Stock Index Performance Year-to-Date

What am I looking at? The performance of airline sector stocks within the ST200. The index includes companies publicly traded across global markets including network carriers, low-cost carriers, and other related companies.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more airlines sector financial performance. 

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